Antitrust and Texbooks

The Tribue in an article here discusses Gov. Rob Blagojevich's assault on college textbook publishers. Of course, the arsenal of any attack whose basis is "I don't like how X is sold" is the antitrust laws, whose loosey-goosey formulation make them amenable to free-spirited, civic-minded politicians out to score some cheap points. (Sarcasm intended.)

Governor Blagojevich states, "College is the time for our young people to explore those subjects that spark their interest, but that journey could come to a screeching halt due to what looks like price gouging." Actually that quote came from a released statement, which makes it doubly laughable. Or it would be, if accusations of "price gouging" weren't serious. The article notes, at the very end, that textbook publishers make a modest profit on their business. Even if they were making hayloads of money, all the same arguments that apply to the development of drugs (i.e. high fixed-costs, very low marginal costs) apply with equal (if not greater) force here. Low marginal-cost industries are an easy target for politicians because the politicians, unlike the publishers themselves, can take a quaint myopic view that paints the textbook publishers greedy capitalist demons.

The accusations are also dangerous because they encourage enterprising politicians to devise idiotic "solutions." Case in point (from the same article): "the [education] board may look at whether state-led volume textbook buying, on the model of Blagojevich's effort to import lower-cost prescription drugs from Canada--would bring savings." So now we're talking about getting the state into the business of buying books in bulk and then distributing them... This proposal actually really causes me physical pain. It's just such a bad, bad, bad idea for all the reasons that free markets are good... The government just isn't good at responding to market forces, and given the low profit-margins recouped by the publishing industry, it doesn't seem like much benefit would redound to society. In this second-best world of ours, I would much, much rather have the government subsidize textbook purchases than get in the business of buying and selling. (It should go without saying that I would rather the government not be involved at all...)

There's a lot more to say about this, but I leave that to Tom or Brian. For now, it's sufficient to say that antitrust laws in the hands of politicians are dangerous. If something expensive because it costs a lot to make, antitrust laws simply cannot help -- this category of goods is simply beyond their jurisdiction.